Although it is well documented that the ‘build to rent’ sector is continuing to go from strength to strength, with new entrants such as John Lewis leading to rising investment volumes, what is interesting are the trends that are beginning to be played out.
We are seeing a real shift in young professionals looking for rental properties outside of London and the sector is responding to this with an increase in the number of development opportunities being brought forward in the regions. Activity outside of London accounted for 84% of all planned BTR developments (as of October 2021).
“It is clear that the pandemic has accelerated the demand for space outside of London and made everyone re-evaluate their priorities, including how and where they want to live.
However, the sector is not just the preserve of young professionals seeking purpose-built high rise apartment blocks; there are now an increasing number of developers seeking to deliver single family housing within suburban or rural locations. This is an area that is experiencing rapid growth, attracting investment from the likes of L&G, Goldman Sachs and Packaged Living, and now constitutes around 12% of the BTR market. With an increase in the proportion of households with children in the private rented sector over the past ten years, the demand for high-quality family-friendly rental properties in well-connected locations will continue to rise. 2021 was the year we started to hear about single family housing and, in the next twelve months, watch out for multi-family housing being the latest north American trend to hit the UK shores.
Interestingly, we are seeing a growing number of older homeowners choosing to sell up and rent in their retirement too, being attracted to high-quality accommodation, locations close to local amenities with good transport links, onsite management services with a care aspect and being part of community living. It is a model that is piquing the interest of a few investors who see the BTR sector as providing a solution to this growing demand and offering a new choice in the later living sector. There is also a trend for this later living BTR product to be located centrally to take advantage of the “grey pound” in our town centres.
Finally, we are seeing a focus on the way homes are being designed and constructed to create more energy efficient spaces. Modern methods of construction mean that homes will be built more efficiently, sustainably and quickly, with customers looking at developments that have a good energy performance rating, track energy consumption and promote wellbeing.
Moving away from the buzz around new build stock the UK’s existing private rental portfolio has also been attracting investor interest. Bricklane’s deal with Moorfield Group is notable in that, by using a tech platform called Compass, it aims to open up the UK’s existing stock of single-family housing to institutional investors. A vision to instutionalise the private rented sector is exciting for the sector as a whole. The intention is to buy 2,000 houses and flats over the next two years in London, Bristol and the South East from the existing 2.5m buy-to-let landlords.
Purposeful investment in the BTR sector has also been evident in the last twelve months. Home REIT became the first UK real estate investment trust to focus on reducing homelessness (and creating investor profits). They invest in areas with the highest rates of statutory homelessness. This has the twin effect of reducing the local authority’s costs of accommodation and providing security and stability for residents.
What is clear from the above is that the private rental sector is a dynamic one, ever evolving to expand and diversify both to meet the living needs of the customer and, due to the significant growth opportunities, attract ongoing and innovative institutional investment.
This article appears in our Investing in Living report. To access the full report, please click on the link to the right of this page.
Disclaimer
This information is for educational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given. © Shoosmiths LLP 2024.